Belarus on the Brink of Dumping War

The reluctance of the government of the Republic of Belarus to develop and implement anti-dumping legislation could prove disastrous for the national telecommunications market. At the moment the notion of dumping does not even exist in the country’s domestic market, which means that companies can use price wars not only to get a privileged position, but also to make their competitors bankrupt.

Belarusian monopoly

The telecommunications market in Belarus develops in a very peculiar way. The operator “Beltelecom” is a state-owned monopoly rendering services to both individuals and private providers. The state company has totally different tariffs for the two categories of clients. For instance, a standard channel of 1 Mbit/s costs 164,000 Belarusian roubles (USD 15.32) for a commercial provider.The private customers of Beltelecom get the same service for 42,300 roubles (USD 3.95). It is almost a five times difference.

It is worth noting that Belarusian commercial providers by law do not have any right to purchase Internet access channels from other organisations or providers. The reason for that is the government’s control of the development of its telecommunications market. This position has been repeatedly criticised, particularly by international financial and legal organisations. Human rights advocates connect such state control with the violation of freedom of speech in Belarus. The Belarusian authorities once promised to demonopolise Beltelecom by depriving the company of its exclusive right to sell external channels of Internet access. It was officially done in 2014 when the National Traffic Exchange Centre (NCOT), which reports directly to the Operations and Analysis Center under the President of the Republic of Belarus (OAC), announced that it would begin selling channels to commercial providers. The new government institution also received a legislative opportunity to offer Internet access with guaranteed bandwidth (external channels) to private operators. Naturally, players in the Belarusian market expected a more attractive pricing approach. But the NCOT demonstrated consistency with Beltelecom’s pricing policy, claiming that it was necessary to preserve the economic stability of the national operator. The Belarusian monopoly has remained intact.

Stability in everything

The economic policy of Belarus is aimed at its stability, particularly in prices. However, increasing prices is an everyday reality in the republic. In September 2014 the price of fuel alone increased threefold. Now a litre of petrol costs USD 1. At the same time the price of telecommunications services changes more steadily and does not depend on exchange rates. The last time the monopoly changed the price of Internet access was at the beginning of 2014, due to its legal obligation to charge VAT (value added tax). Then all of their price plans increased by 20%. The same thing happened to all providers that similarly started to charge VAT to their customers. Since then there have been no price changes in the country’s telecommunications market. Yet, all providers note that the cost of customer service has increased in line with the US dollar exchange rate. Considering the fact that the Belarusian economy still depends on this currency, albeit payments in dollars are not permitted in the country, providers are naturally interested in raising their prices. The state operator impedes this using its own financial policy to control free pricing. Under Belarusian law it is legal to increase prices for Internet access. However, operators fear that any rise in prices may increase their churn rate. Besides, the price plans of commercial providers lose out to the offers of the state-owned monopoly. For example, Beltelecom offers its clients unlimited Internet access. Because their channel is overpriced, commercial operators have to share it out among customers, thereby limiting their data allowance. In order to attract customers, private operators keep calling their price plans with a defined limit “unlimited”, because even after having used all their allowance, clients still can access the Internet at the minimum speed.

So, prices for telecommunications services in Belarus can be described as “stable”, but not identical. Commercial operators, which try to raise prices by means of additional services, provide more substantial offers. However, they still pay great attention to the pricing policy of Beltelecom, which in the fourth quarter of 2014 increased pressure on its competitors by offering their clients such deals which many commercial operators called “dumping”.

Dumping offers

In summer 2014 the national operator Beltelecom found itself at the heart of a scandal. At the round-table session of the House of Representatives, the National Assembly of Belarus, the Association “Belinfocom” which represents almost all telecommunications companies, except Beltelecom, accused the national operator of using the “scorched earth policy”. The reason for that was a price plan offered by the company in several cities of the republic. The 3 Mbit/s Internet package was sold at the record-low price of USD 2 per month. Besides, the package was offered for a period of up to 1.5 years (after which its price would increase). On their part, the participants in the discussion demanded that the government take immediate measures to establish anti-dumping laws.

Belarusian operators can get away with dumping…

Belarus is not planning to implement anti-dumping legislation applicable to the national market of telecommunications. We have learnt about this from the members of Belinfocom, who brought up the idea of establishing such legislation.

The problem of anti-dumping regulations was a matter of active debate on 25th June, at the round-table session of the House of Representatives, the National Assembly of the Republic of Belarus. The discussion began when the members of the Association “Belinfocom” showed their disagreement with the policy of the state-owned Internet operator “Beltelecom”, which announced a long-term promotional deal offering Internet access for only 23,220 roubles per month.

Belinfocom dubbed this move the “scorched earth policy” and proposed the development of anti-dumping legislation.

“True, anti-dumping laws are certainly needed. The recent piece of news about changes to the “Record” series of price plans offered by Beltelecom unequivocally proves that. Not long ago it became known that there were dumping promotional offers in some cities of the Gomel Region. Where there is Beltelecom with its xPON, there is almost no room for another provider. It is impossible to offer high-quality service for such a price and make at least some profit at the same time. Why don’t they offer out-of-band channels to telecommunications operators at 390,000 Belarusian roubles for 100 Mbit/s, as it is stated in the price plan “Record”? Beltelecom’s price lists for telecommunications providers are freely available on its website,” said Roman Bleschov, the Director of ISP “Aichyna Plus”.

As it has turned out, no relevant ministries and departments in Belarus have started working on anti-dumping laws yet.

“According to the Ministry of Economy, the term ‘dumping’ usually applies to foreign economic activities. In the domestic economy this notion just does not exist. Therefore, for the Ministry it is nonsense to apply anti-dumping laws to the national market. I do not agree with this approach, but I am not a lawyer, so it is quite hard to dispute the ideas of the Ministry of Economy,” said a representative of Belinfocom.

However, the expert is positive that Belarus needs anti-dumping laws.

“If we are to become a country with a market economy, then we should have such legislation. Dumping can destroy any business. It can be a tool for exerting pressure on commercial companies, destroying a business or taking it over,” noted the expert from Belinfocom.

“When private operators organise promotional offers, it is called ‘the promotion of competition’. But when Beltelecom takes a similar approach – in regions, where competition is very strong and we have to fight for our market share – it is immediately labelled ‘dumping’, raising a storm of emotions,” said the head of the state company.

However, private providers insist that promotional offers cannot last 1.5 years like the deal from Beltelecom. Experts are certain that this is a clear example of dumping, not a promotional move.

Resume: will there be a war?

In fact, the stalemate over anti-dumping legislation has already led to some negative consequences in the Belarusian telecommunications market. The national operator has expanded its range of promotional deals, thereby lowering prices for Internet access by 50% for the general population. Experts believe this is the way the monopoly is trying to complete the state plan and to report about 2 million customers using broadband Internet access by the end of the year. It is worth mentioning that the Ministry of Telecommunications regularly establishes target figures, not only for Beltelecom, but also for private providers. Despite this fact, dumping offers have every possibility to ruin commercial operators. It is already known that at least three companies could be sold. According to their owners, they “have slowed down in their development and cannot offer anything competitive with the price policy of Beltelecom”. Some people say that at the beginning of next year the company will stop the practice of dumping and enticing customers from the commercial sector. Otherwise, by the end of 2015 there will be no private operator left in Belarus.